Lehman Dec 28

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1. When Corporate Culture Goes Toxic, From Lehman To Volkswagen

   Dec 28, 2015 | LiveMint

   By Morgen Witzel
   
   
   ...Under the leadership of executive chairman Richard Fuld, this trend intensified. Lehman Brothers pursued growth at all costs, regardless of the warning signs in the world economy. Just a few months before the crash of Lehman Brothers in September 2008, Fuld was investing heavily in expansion, ploughing much of the bank’s remaining ...

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1. When Corporate Culture Goes Toxic, From Lehman To Volkswagen

   Dec 28, 2015 | LiveMint

   By Morgen Witzel

   It is an ancient and time-honoured rule of business: when things go wrong, throw the CEO overboard. When American regulators charged Volkswagen with deliberately falsifying emissions tests for diesel cars, it was almost inevitable that the first casualty would be Volkswagen Group CEO Martin Winterkorn. He resigned a few days after the news broke.

   ...Cultures of failure
   
   In many other cases, though, the seeds of failure stem from deep inside the company, its values and its culture. Those seeds sometimes lie dormant for years, even decades.

   Take, for example, the case of one of the most famous business failures in recent years, the collapse of Lehman Brothers. Founded in 1850, the firm was in the early years famous for its high-minded culture that put service to clients and value creation first, and profits and growth second. Lehman Brothers didn’t just lend money to clients, it built partnerships with them and enabled those clients to grow. That idea, for more than a century, was at the heart of Lehman’s culture.

   After the death in 1969 of Bobbie Lehman, the last of the original founding family to run the bank, the culture of Lehman Brothers began to change. The new leaders of the bank were unable to resist demands from bankers and traders for higher pay and performance-related bonuses. New performance metrics were introduced, linking bonuses to profit and growth.

   Within a couple of decades, profit and growth had become the purpose for which Lehman Brothers existed. Clients were now of secondary importance; they were merely the means by which these goals were achieved.

   Under the leadership of executive chairman Richard Fuld, this trend intensified. Lehman Brothers pursued growth at all costs, regardless of the warning signs in the world economy. Just a few months before the crash of Lehman Brothers in September 2008, Fuld was investing heavily in expansion, ploughing much of the bank’s remaining cash into a venture in the United Arab Emirates.It is easy to argue that Fuld was responsible for the failure, and in part he was, but only in part. Fuld was also a part of the high-performance, profit and growth-driven culture that emerged after 1969. He came up through the ranks in Lehman Brothers, and was imbued with that culture.

   It could be said that in Fuld, Lehman Brothers got the leader it wanted, and perhaps the leader it deserved. His tenure as executive chairman merely reinforced the existing culture and drove the bank further and more swiftly towards disaster...

   For full story: http://mintonsunday.livemint.com/news/when-corporate-culture-goes-toxic-from-lehman-to-volkswagen/2.4.3193240043.html
   

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